James Justice, a West Virginia coal and farming baron who recently sold coal mines to the Russians for $436M, has purchased the Greenbrier Resort in West Virginia. (The Washington Post, May 16, 2009, p. 1). He did so for $20M (plus a $7.5M contract cancelation fee to Marriott) upon condition that the pending bankruptcy be dismissed; meaning that $100M in unpaid bills remain due and owing.

                        Why buy an asset so deeply in the red?

1.         James Justice can afford it.

2.         He probably got good value despite the payables, due to the potential gambling revenue.

3.         You have to spend money to make money, and sometimes you need to spend heavily.

4.         The creditors will probably agree to extended payment terms; because a bankruptcy discharge would have yielded them nothing.

5.         The Resort just received a gaming license.

6.         He’s become a local hero to the employees and townspeople.

7.         The governor and a U.S. Senator are in favor of the deal.

8.         James Justice knows the distressed property drill: Increase employee wages and benefits to create a positive mental attitude; re-establish the brand; market heavily; and spend more instead of cutting costs.

                        The Greenbrier’s perilous financial status and bankruptcy filing may be compared to the “stick shaker” warning of impending aerodynamic stall on that fateful Colgan Airways flight to Buffalo: The fatigued, hapless pilot pulled the stick to raise the aircraft’s nose instead of pushing it to increase airspeed by flying towards the ground. Sometimes with a failing business as with an aircraft flying almost too slowly to remain aloft, you must do something counter-intuitive for the project to survive. The purchase of The Greenbrier is an application of this fundamental principle of the turnaround.